After what happened last year with the BP oil blowout in the Gulf of Mexico, and how the White House approached this environmental disaster by forcing BP to cough out $20 billion .... I am not surprised to read stories like this one .... and all the speeches in the world are not going to change that. Mind you we are not the only ones who has a government that stumbles on how energy should be delivered .... the British are in a class of their own.
Moscow eyes power control...
By Roman Muzalevsky
As Central Asia opened up to the rest of the world after the collapse of the Soviet Union opportunities emerged for the regional countries to build links with Europe, Southeast Asia, and the Middle East. This has proved to be significant in the development of cross-regional energy and transport corridors....
These "bridge" initiatives serve to strengthen the sovereignty of the republics in the region that is often proclaimed by Russia to be a zone of its privileged interests, while facilitating the development of economic and political linkages between countries and regions.
The Baku-Tbilisi-Ceyhan and the Turkmenistan-Uzbekistan-Kazakhstan-China pipelines are examples, like the prospective Nabucco pipeline that could bring gas from the Caspian through the Caucasus to Europe. Two other initiatives may materialize in the near future: the Turkmenistan-Afghanistan-Pakistan-India gas pipeline project (TAPI), promoted by Ashgabat after recent gas-related rifts with Russia, and the Central Asia-South Asia electricity scheme (CASA-1,000), designed to bring electricity from Kyrgyzstan and Tajikistan to Pakistan and Afghanistan. They could cost about US$4 billion and $1 billion respectively and deliver up to 33 billion cubic meters (bcm) of gas and 1,000 megawatts of electricity annually.
In December 2010, TAPI participants agreed to construct the pipeline, while CASA parties are close to completing the related feasibility study. Yet, the picture would not be complete without Russia's potential role in the projects and the broader region, which may find itself in a power vacuum after the military withdrawal of coalition forces from Afghanistan. Moscow has recently pushed very actively for its own participation in the TAPI and CASA-1,000 projects, after it initially considered taking part in such initiatives during the Soviet era and in the 1990s.
Some discern in Russia's interests the desire to control energy markets centered on the gas-rich Turkmenistan and water-rich Kyrgyzstan and Tajikistan, which it does not want to fall into the hands of others on non-Russian terms. By advancing and participating in TAPI, Moscow could purportedly divert Turkmenistan away from the trans-Caspian energy initiatives bypassing Russia and also lay the groundwork for the reorientation of Russia's own gas market to the rapidly emerging Asia.
Others believe Russia wants to develop a north-south geopolitical axis, whereby it could also attempt to promote, on its terms, the emergence of Novyi Sredniy Vostok: a geopolitical space extending from Russia across Central-South Asia to the Middle East, which could compete with similar plans, allegedly spearheaded by the US to the disadvantage of Russia and China, like the "Greater Middle East" or the "Greater Central Asia".
These arguments are not necessarily exclusive. But the reality is that Moscow can no longer afford to enforce or dominate the geopolitical dynamics in Central Asia alone. In this context, the positions of the TAPI and CASA participants on Russia's potential role in these projects are crucial determinants. Turkmenistan is very concerned about what it views to be Moscow's efforts to join TAPI and derail Nabucco at any cost.
Last October, Russian Deputy Prime Minister Igor Sechin reportedly said that Moscow and Ashgabat were exploring the possibility of Russian participation in the TAPI project, while downgrading the prospects for Nabucco. Ashgabat denied the information, saying the "statements are treated in Turkmenistan as an attempt to hinder the good course of international collaboration of our country in the energy sphere and cast doubt on commitments to our partners". It also stated that no agreements concerning the Russian participation in the TAPI project existed.
Unlike Turkmenistan, Pakistan, Afghanistan and India have all expressed their support for Russia's participation in the TAPI project, provided all parties agree. Most recently, Islamabad did so last November, while Kabul followed in January of this year during President Hamid Karzai's meeting with his Russian counterpart, Dmitry Medvedev, in Moscow. During the meeting, both presidents agreed to expand their economic and security cooperation, which could prove useful for Afghanistan if the North Atlantic Treaty Organization (NATO) withdraws from the country. Russia currently plans or already implements some energy and transport projects in Afghanistan. It remains to be seen whether Moscow will participate in the TAPI initiative, but one thing is clear: Ashgabat is likely to stand in the way.
As for the CASA-1,000, Moscow offered to invest US$500 million in the venture. The Asian Development Bank and participants in the scheme view Moscow's role as instrumental given the project's financial constraints. Meanwhile, the US has appeared more cautious. Last September, US Assistant Secretary for Central and South Asia, Robert Blake, denied speculation about the alleged struggle between the US and Russia on the CASA-1,000 related issues, saying Washington expects to see the results of the feasibility study before adopting any position.
One such issue is the energy dispute between upstream Tajikistan, keen on enhancing its energy security by pursuing hydro energy projects, and downstream Uzbekistan, concerned for its cotton-dependent agriculture. Dushanbe relies on Moscow for political, financial, and technological support in its energy initiatives. However, the prospects exist: Russia has already invested about $600 million in the country's Sangtuda-1 power station, but it has been circumspect on Tajikistan's Rogun and Kyrgyzstan's Kambarata hydro ventures (which may be necessary for CASA-1,000 to succeed) for fear of distancing Uzbekistan.
Russia, Tajikistan, Pakistan and Afghanistan also seek to bolster their energy, trade, transport, and security cooperation. Besides participating in the CASA-1,000 project and the anti-drug quartet launched in 2009, its members are also considering building a transport artery through the Afghan Wakhan corridor.
Despite their clear prospects and benefits, the TAPI and CASA-1,000 projects also face daunting technical, financial, and political challenges, intermeshed with geopolitical designs of numerous players, not least the US and Russia. If realized, both projects would expand the portfolio of options available to the countries in Central and South Asia to promote their development in concert. But the question that would still remain unanswered in many capitals is: on whose terms?
By Robert M Cutler
MONTREAL - The information wars around the competing pipeline projects to take gas from the Caspian Sea basin into Europe have intensified, reflecting the crucial period for final investment decisions that project planning has now entered.
The basic opposition that exists, despite occasional disclaimers from various quarters, is between the European Union-supported Nabucco pipeline, which is planned to pass through Azerbaijan, Turkey and Southeast Europe to Central Europe, and the Russian-sponsored South Stream project. The proposed route of the second has continually been revised over the years, reflecting among other things the absence of a full feasibility study.
As now planned, the South Stream route would go from Russia under the Black Sea to either Romania or Bulgaria (still not finally decided), then through Serbia and Hungary into Austria, possibly with one or two spurs passing through Slovenia. Several years ago, it had been conceived that a separate South Stream branch would trace a route through Serbia, Hungary and Slovenia into Italy. Supply to the Italian market, is now being considered instead through a separate Balkan spur into Greece, across the Peloponnesus, under the Ionian Sea to the heel of Italy's boot.
Thanks mainly to German lobbying in Brussels, the European Union decided in the end to support construction, now underway, of the Nord Stream natural gas pipeline from Russia under the Baltic Sea to Germany. Since EU policy documents call for the diversification of sources, the Russian-backed South Stream pipeline has been regarded skeptically in Brussels, and also for other reasons.
Given that Nabucco would eventually take quantities of natural gas from Turkmenistan to Europe, the South Stream project has been correctly viewed as a blocking move by Russia against Nabucco - just as the Russo-Turkish Blue Stream gas pipeline under the Black Sea between the two countries a dozen years ago successfully blocked the Trans-Caspian Gas Pipeline (TCGP - routed by way of Turkmenistan-Azerbaijan-Turkey-Europe) project of that time.
As a result of the proposed South Stream spur through Greece into Italy, the EU begun encouraging the Nabucco consortium to consider merging with the Italy-Turkey-Greece Interconnector (ITGI). The ITGI actually comprises two interconnectors. The Interconnector Turkey-Greece (ITG) already runs 295 kilometers connecting the two named national networks, but the Interconnector Greece-Italy (IGI) is on hold. When constructed, the latter would run 800 km, including 215 km on the floor of the Ionian Sea. The subsea section is also known as the Poseidon pipeline.
The possibility must be considered that South Stream's idea of a spur through Greece to Italy is a bluff, because Italy's gas market is already oversupplied. (That may change if significant unrest in Libya continues, since Italy at present imports about 10 billion cubic meters of natural gas per year from the country.) In objective terms, the idea of this spur distracts attention and creates uncertainty during a crucial period leading up the Nabucco project's final investment decision.
Also, the idea of a South Stream spur to Greece and Italy threatens to co-opt the Interconnector Greece-Bulgaria (IGB) project that the IGI partners recently signed. South Stream's own public documentation clearly suggests that the path of its own Greece-Italy spur would follow exactly the IGB route (also incorporating the Poseidon pipeline project) once it got to Thessaloniki in Greece's northeast. The IGI is competing with Nabucco and yet another project, the Trans-Adriatic Pipeline (see Nabucco, and Baku, filling up on gas, Asia Times Online, May 14, 2010), for natural gas supply from the Phase Two development of Azerbaijan's offshore Shah Deniz deposit.
However, IGI is at a bit of a disadvantage here: it would depend on the Turkish natural gas pipeline system including the notorious Ankara bottleneck, whereas Nabucco would construct a new pipeline; also, it conceded to Turkey a 15% lift-off provision that the Nabucco consortium successfully resisted. A Nabucco-IGI hookup would solve IGI's transit problems in Turkey, allow it to source gas from northern Iraq (and eventually Turkmenistan) in addition to Azerbaijan's Shah Deniz Two.
Still more striking, Nabucco-IGI cooperation (even if there is not a formal merger) would create a gas pipeline ring comprising Central and Southeast Europe plus Italy and Greece. The ITGI leaders resisted this idea when it was first floated, but now they say there is no obstacle in principle to booking capacity for itself through Nabucco. Indirect discussions appear to have been taking place between representatives of the two consortia, but they have not reached the point of direct detailed exchanges. Any specific ideas would eventually require consideration by consortium members within each consortium.
A problem that did not exist before this idea was floated is that an IGI track for Nabucco would represent a modification of the latter's original route plans, for which feasibility studies are complete and detailed engineering studies are in the process of completion. One proposed "solution" is to conceive two phases of implementation of the EU's Southern Gas Corridor project, with the first creating a spur to Greece and through to Italy and the second following the originally planned route to Austria.
Assuming that the natural gas comes from Azerbaijan's Shah Deniz Two development, Azerbaijan will participate in deciding who the buyers will be. The idea already exists to interconnect, with the original planned Nabucco route, the national networks of various southeast European countries; Azerbaijan would be very happy to sell its gas to these countries. However, prioritizing a merged Nabucco-ITGI route to Italy would distract from that possibility.
Although Azerbaijan may possibly be just as happy to sell its gas to Italy (unlikely, however, since it would not have security of demand due to current oversupply to the latter), such a division of the Southern Corridor project into the two aforesaid stages would risk leaving the southeast European field open to South Stream to follow its originally planned track into Austria.
Thus while South Stream proponents seek to justify the idea on rational grounds, its objective result is to give the appearance of a feint, a maneuver to divert attention and confuse priorities at the time when Nabucco is preparing its final investment decision. It has taken many years to bring the Nabucco project to its present situation, and if the opportunity is not realized now, then the necessary political dynamics will not present themselves again for quite some time.
Everybody who is involved knows that. While South Stream may be happy to take an IGI route if it can get one, still it would be up against the same economic, geophysical, organizational, and financial obstacles that have prevented Nabucco and IGI from reaching agreement already. Sowing confusion at the present crucial time is, at a minimum, a side-effect of South Stream's proposal for an IGI hookup.
The idea of splitting the Southern Corridor project explicitly or even implicitly into phases opens up other possibilities, which depend upon the political evolution in North Africa. Still more important than Libya for the EU energy balance is Algeria, which accounts for roughly 30% of all European gas imports through numerous pipelines and liquefaction projects. Any serious long-term disruption of that production would offer Nabucco increased opportunities to send gas to Southern Europe, although either the throughput capacity of the Italian network would have to be increased or new pipelines built further westward.
That in turn would open up the field in Central and Eastern Europe still more widely to the White Stream pipeline project, which would take Caspian Sea basin natural gas to the Georgian coast and then under the Black Sea directly to the EU member states themselves, making landfall in Romania. (See Caspian gas closer to Europe, Asia Times Online, January 20, 2011.) It is not even necessary to assume that each proposed stage of EU Southern Gas Corridor implementation depends upon Nabucco alone, since the EU already includes the White Stream project programmatically under the Southern Corridor umbrella, and White Stream has already completed all necessary feasibility studies.
It is of interest that the idea of combining Nabucco and South Stream is no longer mentioned by any one. This idea had been spontaneously bruited almost a year ago by Paolo Scaroni, head of Italian energy company Eni, a South Stream participant, when it became publicly evident that Nabucco's momentum was clearly overtaking that of his company's joint venture with Gazprom. (See Locks turn in Nabucco door, Asia Times Online, March 12, 2010.) It was immediately and publicly rejected by his Russian partner. It nevertheless contributed to the confusion and distraction over Nabucco that South Stream is now seeking to feed.
The reason why this idea is no longer discussed is that South Stream is simply not part of the EU's Southern Gas Corridor, which is designed to avoid overdependence on Russia. The subterfuge used by those favoring South Stream now is to speak not of the Southern Corridor but of a "fourth corridor" for transit of hydrocarbon energy to Russia.
The "fourth corridor" locution even appeared in a recent Guardian article that suggested that the cost of constructing Nabucco would increase above existing estimates because of the rising price of minerals required to cast the pipes. This would be true for any pipeline including South Stream, which is officially projected already to cost several times the estimate for Nabucco, but that fact went unmentioned.
While discussion in terms of a "fourth corridor" has the appearance of neutrality and objectivity, in fact it covers over an antipathy to the EU's strategic project for the Southern Gas Corridor as defined in officially adopted programmatic documents. Moreover, it only prolongs further the delay in creating a proper organizational design for the Caspian Development Corporation (CDC) by delegitimizing the very idea of this.
The creation of the CDC was mandated by the highest decision-making instances of the EU almost two years ago. It would facilitate the implementation of the purchase and delivery contracts not only for the Nabucco project but for all other Southern Gas Corridor projects as well.
Iran gas pipeline to Pakistan on hold....?
By Robert M Cutler
MONTREAL - The bilateral Iran-Pakistan gas pipeline project is now officially suspended, as the IRIB (Islamic Republic of Iran Broadcasting) website on Sunday quoted Ali Reza Gharibi, the Iran Gas Engineering and Development Company's managing director, as saying that "construction of the ... gas pipeline for export of natural gas from Iran to Pakistan will continue as of next spring", without giving a reason for the suspension.
Events, or their absence, have confirmed the skepticism that in some quarters met rumors of the deal even before the signature of the inter-governmental agreement last May on the basis of an understanding on pricing reached two months earlier. (See Iran-Pakistan pipeline not a done deal, Asia Times Online, June 26, 2009.)
Readers will recall that for a long time there was much talk about an Iran-Pakistan-India (IPI) gas pipeline project. (See Delhi's options beyond Iran, Asia Times Online, March 28, 2006.)
The US-Indian civilian nuclear accord of 2008 is often considered as the carrot that finally tempted New Delhi to cancel its interest in the IPI pipeline, but this interpretation glosses over Iran's severe bargaining maladroitness, which took its toll. The Indian negotiators got tired of Teheran's representatives trying continually to reopen closed chapters of negotiation, insisting on providing a low-quality rather than a high-quality product, and proposing to charge liquefied natural gas prices for gas delivered overland.
The Iran-Pakistan pipeline, supplied by gas from the South Pars field, is planned to begin in Iran's Assalouyeh Energy Zone in the south and run over 1,100 kilometers before crossing the border with Pakistan. Initial capacity is said to be 22 billion cubic meters per year (bcm/y) with a possible final-stage volume of 55 bcm/y.
However, this seems unrealistic in any definite future, as recent statements by Iranian officials involved in the project have made clear that the "final-stage" volume would be achieved only by Pakistan's laying a pipeline inside Iran parallel to the one whose construction has just been suspended.
The tenuous nature of the project's planning is further indicated by the fact that, although Iran says that it has already completed construction of much of the pipeline on its own territory, even the approximate route of the pipeline through Pakistan remains in doubt. Inside Pakistan, it is planned that the pipeline would transit Balochistan and Sindh, but officials there candidly state that the route could change if China's general expressions of interest take more definite shape.
So it is still not certain where the gas will go if it ever gets from Iran into Pakistan. One strong possibility for a long time was that it would go to Pakistan's port at Gwadar in the country's southwest Balochistan, for liquefaction and transport by sea to China. That port opened a little over two years ago following a massive Chinese contribution of both capital and labor to its construction.
A year later, however, China decided not to pursue its plans to construct a 200,000 barrel-per-day oil refinery there, of which it had been intended to send the product northward through Pakistan into southwestern Xinjiang, whence eastward to the energy-hungry Chinese coast.
The reasons given for the unexpected decision were financial, but the lack of security in Balochistan must also have played a role. It is theoretically not out of the question that gas from Iran might go through Balochistan northward following the just-mentioned route. (See Xinjiang: China's energy gateway, Asia Times Online, July 10, 2009.) However, the region is passing through yet another heightened period of social unrest and vocal if not sometimes armed dissatisfaction with the central authorities. Probably it was also feared impossible to guarantee the physical safety of Chinese workers.
Six-sevenths of the 780 kilometers of pipeline to be laid in Pakistan under the present design would go through Balochistan on its way to Sindh. Balochistan province covers four-ninths of the territory of the country although only one-sixteenth of the population lives there. It is one of the poorest parts of Pakistan, but its inhabitants would not under current plans much benefit at all from the industrial construction through their region.
Complicating the situation still further for proponents of the pipeline is the country's still only partial recovery from the July-September 2010 floods. Not only are the power infrastructure and the road systems (including many bridges) yet to be fully re-established, respectively essential for electricity for construction activity and transport for construction materials, but also unexploded ordnance has been washed downstream towards the areas of potential construction sites.
The submersion of much of Pakistan's most fertile cropland would complicate the feeding of construction workers even if transport were fully restored, and even if the local population itself were fully provisioned, neither of which is the case or is likely to be so in the foreseeable future.
The loss of employment due the floods will only increase pressure to reorient any pipeline construction project in the direction of benefiting the local population and not have workers brought in from elsewhere. Yet many of the jobs would be skilled and even minimal training for peripheral jobs assisting the construction would be yet another expense that would complicate whatever plans still exist.....